3 BUSN The World Marketplace: Business without Borders ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders • What opportunities exist in the world economy for businesses? • Why nations trade? • How we measure trade? • How companies reach global markets? • What are the barriers to international trade? • What are the benefits and criticisms of the free trade movement? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders An Unprecedented Opportunity… “ “A company that keeps its eye on Tom, Dick and Harry is going to miss Pierre, Hans, and Yoshio.” Al Ries, marketing strategist and author “ BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 3 The World Marketplace: Business without Borders An Unprecedented Opportunity… *CIA World Factbook, 2008 Population Estimates, updated January 22, 2009 **CIA World Factbook, 2008 GDP Estimates, updated January 22, 2009 ***CIA World Factbook, 2008 GDP Growth Estimates, updated January 22, 2009 Sources: Rank Order Estimates, CIA – The World Factbook website: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html, accessed January 22, 2009, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html, accessed January 22, 2009, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html, accessed January 22, 2009 BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders Key Reasons for International Trade Access to Factors of Production Reduced Economic Risk Inflow of Innovation BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders Key Reasons for International Trade: Competitive Advantage Opportunity cost –The cost of giving up the second-best choice when making a decision A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources BUSN Comparative advantage - the benefit a country has in a given industry if it can make products at a lower opportunity cost ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders Addicted to Global Branding BrandChannel.com “brandjunkie” awards brands that inspire and shape our world • In 2008, Facebook took top honors for successful viral marketing • Apple got kudos for innovative packaging • 12.6% of brandjunkies thought no brand made a real effort to be GREEN BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders Global Trade: Taking Measure • Balance of Trade Trade Deficit Trade Surplus • Balance of Payments Balance of Payments Deficit Balance of Payments Surplus Exchange Rates Countertrade BUSN â2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The World Marketplace: Business without Borders Global Trade: Exchange Rates STRONG DOLLAR VS EURO: (Example: $1.00 = 1.20 euros) WEAK DOLLAR VS EURO: (Example: $1.00 = 60 euros) U.S travelers to Europe European travelers to U.S American firms with European operations European firms with American operations European exporters American exporters BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part BUSN The World Marketplace: Business without Borders Seizing the Opportunity: Strategies for Reaching Global Markets ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 10 The World Marketplace: Business without Borders Controlled Capitalism: A contradiction of terms? The Chinese government has demonstrated that capitalism – combined with strict control – can be highly effective •The controlling hand of the government was especially visible before the 2008 Beijing Olympics; the government: Ordered restaurants to remove dog meat from their menus Mandated a special training program for 90,000 taxi drivers Encouraged residents to participate in an online international etiquette program •China’s control has kept the country in better shape than the rest of the world at the outset of the global economic crisis •China’s free market reforms are modeled after western capitalism and have driven China’s growth Can America learn something from China? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 13 The World Marketplace: Business without Borders Barriers to International Trade Sociocultural Differences Economic Differences Political & Legal Differences BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 14 The World Marketplace: Business without Borders Veggie Surprise, Anyone? • India: Paneer Salsa Wrap: Cottage cheese with Mexican-Cajun coating • Australia: Bacon and Egg Roll: “rashers of quality bacon and fried egg” • Hong King: Corn Cup: A plastic cup filled with corn off the cob • United Kingdom: Five “Toasted Deli” sandwich options • Japan: Shrimp burgers and green tea flavored milkshakes BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 15 The World Marketplace: Business without Borders Barriers to International Trade: Sociocultural Differences Social/cultural differences can rapidly undermine business relationships • • • • • BUSN Nonverbal Communication Forms of Address Attitudes toward punctuality Religious Celebrations Business Practice/Gifts ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 16 • • • • BUSN The World Marketplace: Business without Borders Barriers to International Trade: Economic Differences Exchange Rates Population Per Capita Income Infrastructure Transportation Communication Energy Finance Can you profitably provide your product or service to meet the needs of the market? ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 17 The World Marketplace: Business without Borders The Many Names of Money China England European Union India Iran Israel Japan Mexico South Africa South Korea BUSN Yuan Pound Euro Rupee Rial Shekel Yen Peso Rand Won ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 18 The World Marketplace: Business without Borders Barriers to International Trade: Political and Legal Differences • Political regimes differ around the world • Legal Differences Lack of Enforcement Bribery • Political Climate Stability Violence • BUSN Piracy and intellectual property is a problem in several foreign nations ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 19 The World Marketplace: Business without Borders Global Greening? The world community must take dramatic steps to combat global warming •Change won’t be easy and coordination is vital •The United Nations is sponsoring an international Climate Change Conference in Copenhagen Consider these questions about the conference: Did a treaty emerge? How many nations signed? Did any of the participants surprise you? How? Do you think the conferences and treaties will yield results? Why or why not? What role did the United States play? Do you believe that the role was appropriate? Why or why not? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 20 BUSN The World Marketplace: Business without Borders Protectionism Reasons to Create Trade Restrictions Reasons to Eliminate Trade Restrictions Protect domestic industry Reduce prices and increase choices for consumers Protect domestic jobs in key industries Increase domestic jobs Retaliate against countries who have engaged in unfair trade practices Build exporting opportunities Pressure other countries Use world resources more efficiently ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 21 • • • • BUSN The World Marketplace: Business without Borders International Trade Restrictions Tariffs Quotas Voluntary Export Restrictions Embargo ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 22 The World Marketplace: Business without Borders Free Trade: The Movement Gains Momentum There has been a global move toward free trade – the unrestricted movement of good and services across borders BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 23 The World Marketplace: Business without Borders GATT and the World Trade Organization (WTO) • General Agreement on Tariffs & Trade (GATT) Established in 1948 Now encompasses 125 nations Slashed tariffs by about 30% • World Trade Organization (WTO) Promote International Trade Settle Trade Disputes BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 24 The World Marketplace: Business without Borders GATT and the World Trade Organization (WTO) • The World Bank 185 Member Countries Reduce World Poverty in Developing World Influence Global Economy Provide Financial Assistance Low interest loans • The International Monetary Fund Support Stable Exchange Rates Facilitate International Payments Adopt Economic Policies Promote Trade Lends money to member nations BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 25 The World Marketplace: Business without Borders Trading Blocs and Common Markets Groups of countries promoting the free flow of goods and services • The North American Free Trade Agreement (NAFTA) The largest trading bloc U.S., Canada, Mexico Critics for job loss • European Union (EU) The largest common market 27 nations; combined GDP of $15 Trillion Goal is to bolster Europe’s trade position BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 26 Looking Back • What opportunities exist in the world economy for businesses? • Why nations trade? • How we measure trade? • How companies reach global markets? • What are the barriers to international trade? • What are the benefits and criticisms of the free trade movement? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 27 ... American exporters BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part BUSN The World Marketplace:... appropriate? Why or why not? BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 20 BUSN The World Marketplace:... https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html, accessed January 22, 2009 BUSN ©2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted